With speculation laid to rest, the Hero Honda stock saw a surge on Monday, closing the day at Rs 1,981 per share or 18% up, after hitting an intra-day high of Rs 1,997.9 per share.
Abandoning the scepticism in the days prior to Honda’s exit from the joint venture, most brokerage houses have revised their rating for the company, upgrading it to ‘hold’ or ‘buy’.
Last week Hero Honda said the promoters would buy out the Japanese firm’s 26% stake in the company, adding that there would be no increase in royalty payments to Honda.
“There were a lot of questions on whether royalty payments would go up,” said Alex Mathew, head research centre, Geojit Financial Services.
“The market has reacted positively to the fact that royalty payments would not increase and margins would not be that much under pressure. There are very high chances of the stock breaching the R2,000-per-share mark."
Market analysts felt that the exit of Honda would not materially impact the prospects of the firm and the company is expected to maintain its leadership position.
“The company has a capable and experienced management team with a proven track record in its core business and in managing its daily operations,” said Pawan Agrawal, director Crisil ratings. “It is expected to maintain a robust financial risk profile over the medium term supported by strong operating cash flows, low debt and average capital expenditure plans.”